DOES INDIAN ECONOMIC GROWTH AFFECT BANGLADESH? AN APPLICATION OF AUTO REGRESSIVE DISTRIBUTED LAG

Nazim Ullah, Md. Akther Uddin

Abstract


Growth spillover on neighboring country has been studied recently but not enough empirical literature to support this. More importantly, how regional power like India can affect its next-door neighbor Pakistan, Bangladesh, Nepal, Bhutan and Sri Lanka. Using Bangladesh as a case study, this study employs an error correction model derived from standard time series technique called “Auto Regressive Distributed Lag” (ARDL) proposed by Pesaran-Shin-Smith (2001). Our study has applied a time series data over the period 1975–2014. This study extends existing literature by focusing on growth spillover effect on neighboring country. By using the ARDL technique, the findings indicate that there is a long-term relationship between Indian growth and growth of Bangladesh. It can be argued that Indian growth effects on growth of Bangladesh and it is found statistically significant. A number of policy recommendations have been proposed in order to further strengthen the relationship between these two countries.


Keywords


ARDL; Bangladesh; Growth Spillover; India

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